Record Revenue in the Third Quarter of Fiscal 2011 for Digi International

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Record Revenue in the Third Quarter of Fiscal 2011 for Digi International

Digi International® Inc. (NASDAQ: DGII, _c1296567_) reports a $54.3 million revenue for the third quarter of fiscal 2011.

Financial highlights for the third quarter of fiscal 2011 include:

  • Revenue of $54.3 million in the third quarter of fiscal 2011 grew by 14.9% compared to the third quarter revenue of $47.2 million for fiscal 2010 and by 9.2% compared to the second quarter revenue of $49.7 million for fiscal 2011. Digi’s revenue of $54.3 million in the third quarter of fiscal 2011 is the highest quarterly revenue achieved in the company’s 26 year history.
  • Operating income was $6.2 million, or 11.4% of net sales in the third quarter of fiscal 2011 compared to $2.5 million, or 5.4% of net sales in the third quarter of fiscal 2010.
  • Non-GAAP net income and net income per diluted share was $3.6 million and $0.14 compared to $2.3 million and $0.09 for the third quarters of fiscal 2011 and 2010, respectively. Net income and net income per diluted share was $3.6 million and $0.14 per diluted share compared to $3.8 million and $0.15 per diluted share in the third quarter of fiscal 2011 and 2010, respectively. *
  • Earnings before interest, taxes, depreciation and amortization (EBITDA) were $8.0 million, or 14.8% of net sales in the third quarter of fiscal 2011.
  • Digi exceeded consensus Street revenue and earnings per share estimates.

I’m extremely pleased with the Digi team’s execution and resulting strong financial performance in the third fiscal quarter,” said Joe Dunsmore, Digi’s Chief Executive Officer. “Our revenue momentum continues to be robust with 14.9% growth compared to the year ago quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) as a percent of revenue grew to 14.8% in the third fiscal quarter of 2011, increasing from 11.8% of revenue in the second fiscal quarter of 2011. These results demonstrate additional progress in improving these two key metrics. I anticipate a continued strong performance in the fourth quarter as we finish fiscal 2011.

Business Results for the Three Months Ended June 30, 2011

Revenue from wireless products in the third quarter of fiscal 2011 was $22.5 million, or 41.5% of net sales, compared to $18.9 million, or 40.0% of net sales, in the third quarter of fiscal 2010, an increase of $3.6 million, or 19.2%. Revenue from wired products was $31.8 million, or 58.5% of net sales, in the third quarter of fiscal 2011 compared to $28.3 million, or 60.0% of net sales, in the third quarter of fiscal 2010, an increase of $3.5 million, or 12.0%. Net sales in the third quarter of fiscal 2011 were favorably impacted by foreign currency translation of $0.7 million when compared to the same period in the prior fiscal year.

Revenue in North America was $32.3 million in the third quarter of fiscal 2011 compared to $28.5 million in the third quarter of fiscal 2010, an increase of $3.8 million or 13.2%. Revenue in EMEA (Europe, Middle East and Africa) was $13.0 million in the third quarter of fiscal 2011 compared to $11.6 million in the comparable quarter a year ago, an increase of $1.4 million, or 11.9 %. Revenue in the Asia Pacific region was $6.9 million in the third quarter of fiscal 2011 compared to $5.9 million in the third quarter of fiscal 2010, an increase of $1.0 million or 16.8%. Latin American revenue was $2.1 million in the third quarter of fiscal 2011 compared to $1.2 million in the comparable quarter a year ago, an increase of $0.9 million or 74.3%.

Gross profit was $28.8 million in the third quarter of fiscal 2011 compared to $23.7 million in the same period of the prior year, an increase of $5.1 million or 21.2%. The gross margin was 53.0% in the third quarter of fiscal 2011 compared to 50.2% in the third quarter of fiscal 2010, an increase of 2.8 percentage points. The gross margin was higher in the third quarter of fiscal 2011 than in the comparable period a year ago primarily due to favorable product mix, product cost reductions, and reduced amortization of purchased and core technology.

Total operating expenses in the third quarter of fiscal 2011 were $22.6 million, or 41.6% of revenue, compared to $21.2 million, or 44.8% of revenue, in the third quarter of fiscal 2010. The increase in operating expenses in the third quarter of fiscal 2011 compared to the same quarter of the prior year primarily is due to increased investment in the iDigi® platform and the full reinstatement for fiscal 2011 of the incentive compensation program which had been only partially reinstated in fiscal 2010.

Digi reported operating income of $6.2 million, or 11.4% of net sales, in the third quarter of fiscal 2011 compared to $2.5 million, or 5.4% of net sales, in the third quarter of fiscal 2010, an increase of $3.7 million or 142.3%.

Net income was $3.6 million in the third quarter of fiscal 2011, or $0.14 per diluted share, compared to $3.8 million, or $0.15 per diluted share, in the third quarter of fiscal 2010. Net income in the third quarter of fiscal 2010 benefited by $2.2 million, or $0.09 per diluted share from the reversal of tax reserves associated with the conclusion of an audit of prior tax years and the statutory closing of a prior tax year. Net income in that same quarter also decreased by $0.7 million, net of taxes, or $0.03 per diluted share as a result of expenses incurred in connection with the internal investigation described in our annual report on Form 10-K for the prior fiscal year. Please refer to the table reconciling net income and net income per diluted share to non-GAAP net income and net income per diluted share which is provided later in this earnings release.

Business Results for the Nine Months Ended June 30, 2011

For the nine months ended June 30, 2011, Digi reported revenue of $152.3 million compared to revenue of $135.3 million for the nine months ended June 30, 2010, an increase of $17.0 million or 12.6%. Revenue from wireless products for the first nine months of fiscal 2011 was $61.9 million, or 40.7% of net sales, compared to $49.8 million, or 36.8% of net sales in the first nine months of fiscal 2010, an increase of $12.1 million or 24.3%. Revenue from wired products was $90.4 million, or 59.3% of net sales, in the first nine months of fiscal 2011 compared to $85.5 million, or 63.2% of net sales, in the first nine months of fiscal 2010, an increase of $4.9 million or 5.8%. Net sales in the first nine months of fiscal 2011 were favorably impacted by foreign currency translation of $0.4 million when compared to the same period in the prior fiscal year.

For the nine months ended June 30, 2011, Digi reported net income of $8.2 million, or $0.32 per diluted share, compared to net income for the nine months ended June 30, 2010 of $6.7 million, or $0.27 per diluted share. Non-GAAP net income for the first nine months of fiscal 2011 was $7.5 million, or $0.29 per diluted share, compared to $4.9 million, or $0.19 per diluted share, in the first nine months of fiscal 2010. Please refer to the table reconciling net income and net income per diluted share to non-GAAP net income and net income per diluted share which is provided later in this earnings release.

Digi’s cash and cash equivalents and marketable securities balance, including long-term marketable securities, was $105.2 million at June 30, 2011, an increase of $9.3 million from March 31, 2011. Please refer to the Condensed Consolidated Statements of Cash Flows which are included in this earnings release for additional cash flow details. At June 30, 2011, Digi’s current ratio was 6.4 to 1 compared to 6.8 to 1 at March 31, 2011.

Third Fiscal Quarter 2011 Business Highlights:

  • Digi announced that Efficient Energy America, Inc. (E2America) is using its iDigi® Device Cloud™, ConnectPort® X4 gateways and XBee® ZB ZigBee modules to wirelessly enable the E2 intelligent commercial building control system. Installed in restaurant chains and other commercial buildings across the US, E2America’s Smart Grid efficiency technology reduces energy consumption and demand by optimizing HVAC efficiency. On average, customers experience annual savings of $7,000-$8,000 per site.
  • Digi announced that PowerDash is using the ConnectPort® X2 Smart Energy wireless gateway and iDigi® Device Cloud™ to connect its energy-performance monitoring solutions to Smart Energy devices for residential solar installations. It is also using the ConnectPort® X4 for commercial/industrial solar power installations to connect a broad range of production, metering and sensing equipment.
  • Digi announced a strategic alliance with TankScan™, a global tank-monitoring solution provider and division of ATEK Products. TankScan is using Digi’s ConnectPort® X cellular and Ethernet gateways and the iDigi® Device Cloud™ to enable remote access and management of storage tank information.
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